It has come to our attention that many of the LVS sell-side models and price target derivations are failing to account for about 157 million shares related to in-the-money warrants.
As a reminder, LVS completed a $2.1BN stock preferred and warrants issue in November 2008. LVS issued 10,446,300 shares of 10% Series A Cumulative Perpetual Preferred Stock and warrants to purchase up to an aggregate of approximately 174,105,348 shares of common stock at an exercise price of $6.00 per share and an expiration date of November 16, 2013. During the 1H09, 1,106,301 warrants were exercised to purchase 18,438,384 shares of common stock at $6.00. Currently, there are still 9.4MM warrants outstanding and at $16.73 per share, those warrants are certainly dilutive and should be counted in LVS’s share count adding 155.7MM to the 659MM shares outstanding at the end of 2Q09. Even if we exclude options that are in the money, LVS’s share count should be at least 815MM – not the 660MM that most analysts are using.
So check the model of your favorite, non-Research Edge analyst for the proper diluted share count in both their EPS calculation and price target derivation. Both could be materially overstated.